Tuesday, 12 June 2007

Economic Partnership Agreements (EPA) – Why it Boils Down to Bananas

On 4 April, the EU proposed to eliminate tariffs and import quotas for all African, Caribbean and Pacific (ACP) countries as part of the Economic Partnership Agreement negotiations. Economic Partnership Agreements (EPAs) are the trade and development agreements that the European Union is presently negotiating with ACP countries. These agreements are set to replace the generalized preferences system, which are incompatible with the WTO rules. The EPA will replace the trade chapters of the 2000 Cotonou Agreement between the EU and the ACP countries. The proposal covers agricultural goods like beef, dairy, cereals and fruit and vegetables. The EPAs are aiming at the sustainable development of ACP countries, their integration into the global economy and the eradication of poverty. Furthermore, they also aim to facilitate access for ACP products to the European market by enabling a free trade area and to support the process of regional integration.

According to the European Commission, this offer will give all ACP countries the same full access to EU markets that all Least Developed Countries have under the EU's ‘Everything But Arms’ Duty and Quota Free market access system. However, development campaigners are not as content with the offer, arguing that the EU just wants to gain greater access to ACP markets. These agreements are scheduled to be signed before January 2008.

The Council, under the Development Cooperation item, reiterated its wish to see the Economic Partnership Agreements with ACP countries and regional negotiations completed on time. The Council has recognized that “access to ACP markets by the EU must be progressive and carefully managed, and that flexibility in favour of ACPs (exclusions of products, long transition periods and safeguard clauses) must be compatible with WTO rules.”

However, not all Member States are pleased with prospect of ACP countries opening up their markets. Spain fears that its bananas will not be able to compete with the cheaper prices of the ACP bananas. France, Portugal and Poland are in support of Spain. Therefore, bananas might be considered as sensitive a product as rice and sugar. Other Member States, such as Britain, the Netherlands and Sweden are very much in favour of complete opening of the markets.

In the meantime, the European Parliament called the Commission to make the conditions for the Economic Partnership Agreements less onerous for the ACP countries. Obviously, ACP countries are very concerned with the impact of such agreements on their economies. Therefore, Robert Sturdy’s own initiative report called for the “pacing, timing and scope of liberalisation to be gradual and flexible in order to improve ACP regional integration and competitiveness.” Furthermore, it asked for “duty-free, quota-free market access for the ACP as well as simplified, liberalised and more flexible rules of origin in EPAs that is the case under the 'Everything but Arms' initiative.”

The ACP-EU Council of Ministers met in Brussels on 25 May to assess the state of negotiations on the Economic Partnership Agreements. The Council has endorsed a joint review of the progress of the negotiations (as required by Article 37(4) of the Cotonou Agreement, based on six regional reviews for all EPA regions). It has recognised that EPAs “must take account of the specific economic, social, environmental and structural constraints of the ACP countries and regions concerned, as well as of their capacity to adapt their economies to the EPA process.”

All the parties are committed to concluding negotiations by the end of this year but, it should be noted that in order to meet the deadline there must be acceptable progress in all regions, in three key areas: market access, the text of the agreement, and the accompanying measures, such as development finance and EPA related adjustment costs.

It is well known that the EU offered market access to ACP Countries but only after transitional periods and with special treatment for a number of highly sensitive products. Transitional periods were proposed in the EU’s market access offer for rice and sugar. With regards to bananas, before the conclusion of the negotiations, the European Commission will make an assessment of developments and, if necessary, submit relevant proposals to ensure adequate treatment is provided.

The European Council recognized the need to apply trade defence measures, when necessary. Clearly, ACP countries took the view that ACP exports will have a limited potential impact on the European Union’s commercial interests. Consequently, those countries have proposed that the EC should waive its right to apply safeguard measures under EPAs. The EC has proposed “asymmetry in both safeguard measures and liberalisation schedules as the means to take account of the development needs of the ACP countries in this respect.” The ACP countries have called for the trade-distorting subsidies in the cotton sector to be abolished. Federal Minister Heidemarie Wieczorek-Zeul guaranteed the German Presidency full support on this issue.

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